History does not repeat itself but it rhymes, according to the UKâs longest serving fund manager.
Nils Taube, who began his career at UK stockbroker Kitcat & Aitken in 1948, co-founded Taube Hodson Stonex Partners 11 years ago and this year launched another firm.

He was a non-executive director on George Soros’ Quantum fund until 1999 and GAM’s Andrew Green worked under Taube at Kitcat for several years before helping to found GAM in 1983.

However, despite almost 60 years in the industry, the global equities manager has been taken aback by the markets’ dramatic oscillation since July.

“This has been much worse than I expected. It has been violent and quick, like a constant yo-yo. There are lots of things that people took for granted that are no longer applicable,” he said.

Taube, who was born in Estonia, said the volatility reminded him of the crash in October 1987, when some markets fell by as much as 40% in a month.

“The markets were crashing out. On Friday the S&P fell 100 points and a further 500 points on the Monday after.

“We were hugely short on the FTSE and the S&P indexes and did very well,” he said.

However, he said the interest rate environment was different today: 20 years ago interest rates were in double figures, compared with 10-year gilts at about 4.5% today.

While he believes that holding shorts could be profitable in today’s environment, given that his fund is an authorised open-ended investment company to which retail investors have access, he is holding large cash positions.

“Equities are not expensive but they have not been oversold yet,” he said.

The value of his fund has dropped by about 2% since launch in April, avoiding a larger dip because of its defensive holdings and relatively high cash position.

After this summer’s volatility, it is 35% in cash and 25% invested in energy stocks, which he favours because they were undervalued before the market decline.

“They have not caught up with their value, so they have not been hit that badly,” he said.

He is avoiding financial stocks as even the most trusted institutions have suffered under recent conditions. Taube points to Barclays shares, which, while strong, have fallen from a peak in the face of concern over the levels of exposure that financial institutions have to US sub-prime debt.

He said: “I think the market volatility needs time to run. How deep it will be is difficult to forecast. If yesterday was a terrible day and today sees a rally of 25 basis points, that is not convincing.

“Our policy of being liquid means that we could do well compared with everyone else in current conditions.”